As Redlining Persists, Camden Area Among Hot Spots in U.S. for Mortgage Denials

Blacks and Latinos seeking a home loan in New Jersey are denied conventional mortgages at rates higher than whites, despite a 50-year-old ban on racial discrimination in lending, mortgage data show.

A year-long investigation of lending practices conducted by Reveal, from the The Center for Investigative Reporting, found that redlining continues in metropolitan areas throughout the nation. Redlining is when loans are denied due to a person’s race, ethnicity, or religion. Reveal analyzed millions of records publicly available through the Home Mortgage Disclosure Act for its investigation.
Among the 25 areas with the greatest redlining in the country is the Camden metropolitan area, which includes Camden, Burlington and Gloucester counties. Reveal’s data show that a black loan applicant was 2.6 times more likely to be denied a loan in the Camden metro area in 2016 than a non-Hispanic white applicant, even after controlling for applicants’ income, loan amount, and neighborhood. In that same area, Asians were 1.8 times more likely than whites to have an application rejected. Hispanics did not face rejection at a rate considered statistically significant.

It may not be surprising that the Camden area was found to be the worst in New Jersey because the Reveal investigation showed that the adjoining Philadelphia market was the worst in Pennsylvania.

Fair Housing Act called into question

NJ Spotlight analyzed other New Jersey data compiled by Reveal and found blacks were denied loans at a rate of almost 19 percent, compared with 8 percent for non-Hispanic whites, in 2015 and 2016. Lenders denied loans to Latinos nearly 14 percent of the time. The loan rejection rate for Asians was about 10 percent. This data, however, was not as comprehensive and not subject to the same test of statistical significance that the Camden area was.

The study calls into question the effectiveness of the federal Fair Housing Act, which was enacted 50 years ago to ban racial discrimination in lending, and the Community Reinvestment Act that followed it nine years later as an effort to combat redlining, specifically.

“Redlining has been and continues to be a problem in New Jersey,” said Staci Berger, president and CEO of the Housing and Community Development Network of New Jersey. “We’ve seen instances where banks have had to settle with the (US) Department of Justice over their poor, discriminatory lending practices.”

Nearly two-and-half years ago, Hudson City Bancorp agreed to the largest redlining settlement in U.S. history, when it consented to pay nearly $33 million to settle charges that it discriminated against black and Hispanic home buyers. The Department of Justice and Consumer Financial Protection Bureau charged that Hudson City Savings Bank tried to avoid siting branches and marketing mortgages in minority neighborhoods between 2009 and 2013.

“There is a history in the lending industry of not engaging in fair lending,” Berger continued. “That’s why the federal government adopted the Community Reinvestment Act.”

Trump administration would relax rules

But the CRA, which requires lenders to make efforts to give loans to customers in lower-income communities that often have higher proportions of blacks and Latinos, has been undermined for the last two decades, Berger said. Thomas Curry, America’s former top bank regulator, told Reveal that the CRA is part of the problem and needs to be updated and strengthened.

The Trump administration is looking to make further changes that would relax the rules banks must follow.

“I’m cautiously optimistic, at best, of the survival of the CRA as a regulatory and legislative tool under the Trump Administration,” Berger said. “We continue to be concerned that the CRA may be dismantled and what that would mean to folks, particularly those at risk financially.”

Lack of enforcement of existing laws is already a problem. According to Reveal, the Justice Department did not sue a single lender for racial discrimination during Trump’s first year in office.

“If the US Justice Department cannot find one bank in the United States that is redlining, it’s because they are not looking,” Berger said. “We need to make sure the federal government is doing its job.”

‘Hazardous’ for lenders

Map of redlining in Camden area in the 1930s and 1940s

The term “redlining” comes from a practice that began in the 1930s, when surveyors with the federal Home Owners’ Loan Corporation drew lines on maps and colored some neighborhoods red, deeming them “hazardous” for bank lending because of the presence of African-Americans or European immigrants, especially Jews.

(A website called Mapping Inequality has put the original redlined maps online. One of them shows parts of Camden.)

Reveal’s investigation, which analyzed 31 million records, relied on techniques used by leading academics, the Federal Reserve, and Department of Justice to identify lending disparities. It found a pattern of troubling denials for people of color in major metropolitan areas such as Atlanta, Detroit, Philadelphia, St. Louis and San Antonio. African-Americans faced the most resistance in Southern cities — Mobile, Alabama; Greenville, North Carolina; and Gainesville, Florida — and Latinos in Iowa City, Iowa.

Rachelle Faroul was rejected twice by lenders when she tried to buy a house in Philadelphia.

No matter their location, loan applicants told similar stories, describing an uphill battle with loan officers who they said seemed to be fishing for a reason to say no. “I had a fair amount of savings and still had so much trouble just left and right,” Rachelle Faroul, a 33-year-old black woman who was rejected twice by lenders when she tried to buy a brick row house in Philadelphia, told Reveal. Her first rejection came when Faroul was teaching computer programming at Rutgers University at an annual salary of $60,000. In Philadelphia, Reveal found, African-Americans were 2.7 times as likely as whites to be denied a conventional mortgage.

Findings ‘are disturbing’

“The findings of this study are disturbing,” said Anthony Campisi, a spokesman for the Fair Share Housing Center, which is working in courts across the state to get municipalities to zone for affordable housing. “Redlining prevents people of color from achieving the American Dream. At a time when aggressive enforcement of New Jersey’s fair housing laws are expanding housing opportunities in towns across New Jersey, it’s more important than ever to combat discriminatory lending practices that prevent families from taking advantage of the new homes being built.”

Lenders and their trade organizations do not dispute the fact that they turn away people of color at rates far greater than whites, but they told Reveal the reasons are due not to race but to the prospective borrowers’ credit history and overall debt-to-income ratio. In particular, lenders said, the three-digit credit score is especially important in lending decisions, with banks using it to determine whether a borrower is likely to repay a loan.

“While quite informative regarding the state of the lending market,” the records analyzed by Reveal do “not include sufficient data to make a determination regarding fair lending,” the Mortgage Bankers Association’s chief economist, Mike Fratantoni, said in a statement to Reveal.

Reveal’s analysis included all records publicly available under the Home Mortgage Disclosure Act, covering nearly every time an American tried to buy a home with a conventional mortgage in 2015 and 2016. It controlled for nine economic and social factors, including an applicant’s income, the amount of the loan, the ratio of the size of the loan to the applicant’s income and the type of lender, as well as the racial makeup and median income of the neighborhood where the person wanted to buy property. Credit score was not included because that information is not publicly available.

Data from the investigation is available down to the level of about 2,000 towns or sections of cities known as census tracts, some of which had very few loans reported. When aggregated to the county and state level, they show disparities in loan approvals among the races and geographically.

The aggregation tallied nearly 148,000 loan applications throughout New Jersey in 2015 and 2016. An examination of counties with at least 75 conventional mortgage applications for each of the races and ethnicities shows some substantial differences in rejection rates. Monmouth County had the highest denial rate for blacks — 26 percent — and just 8 percent for non-Hispanic whites. In Atlantic County, Hispanics were denied loans more than 17 percent of the time, compared with a 10 percent denial rate for whites. The highest denial rate for Asians was 13.5 percent in Passaic County, while whites were denied loans 9 percent of the time.

Reveal’s data also looked at mortgage rates by bank. New Jersey-based TD Bank had by far the greatest denial percentages by race of any bank writing loans in the state. The bank denied the most loans for non-Hispanic whites — almost 32 percent of all who applied. But its denial rates were far greater for Asians, almost 39 percent, and Latinos, 45.5 percent. And 53 percent of blacks who applied for a conventional mortgage in New Jersey were denied in 2015 and 2016, the data show.

TD’s denial rate of loans for all blacks, including those in other states, was even higher: 54 percent. A bank spokeswoman told Reveal that the bank “makes credit decisions based on each Customer’s credit profile, not on factors such as race or ethnicity.”

Number of loan applications by race and ethnicity and percent denied 2015-2016
County	White applications	White denied	Black apps	Black denied	Hispanic apps	Hisp denied	Asian apps	Asian denied
Atlantic	1,966	10.4	76	15.8	155	17.4	167	11.4
Bergen	10,044	8.6	465	15.7	1,580	11.8	3,785	10.6
Burlington	5,124	7.1	391	14.1	232	14.2	655	8.7
Camden	4,055	6.1	330	19.7	325	16.3	525	10.9
Cape May	1,153	7.5	2	50.0	24	20.8	14	28.6
Cumberland	420	11.0	34	23.5	83	16.9	10	0.0
Essex	5,335	7.2	922	22.0	866	13.5	1,340	9.1
Gloucester	3,160	6.1	130	23.1	103	13.6	145	9.7
Hudson	4,646	9.0	307	18.2	969	16.1	2,865	11.0
Hunterdon	2,555	8.2	35	8.6	115	13.0	189	6.9
Mercer	3,149	7.2	230	21.3	374	13.1	1,530	11.3
Middlesex	5,289	8.5	493	18.3	1,088	14.4	6,170	10.4
Monmouth	11,131	8.3	225	26.2	517	10.8	896	10.2
Morris	8,443	7.1	161	15.5	620	11.3	1,522	9.6
Ocean	9,436	8.1	120	21.7	343	14.3	148	10.8
Passaic	3,559	9.2	126	15.9	764	14.1	490	13.5
Salem	406	6.4	12	33.3	16	18.8	5	60.0
Somerset	4,346	7.8	296	12.2	463	12.7	2,508	8.0
Sussex	2,179	9.5	22	27.3	126	15.1	59	11.9
Union	4,408	7.1	609	20.4	997	16.0	832	8.7
Warren	1,338	10.6	40	10.0	99	13.1	48	8.3
NJ Total	92,142	8.0	5,026	18.9	9,859	13.8	23,903	10.2